Dow component AT&T Inc. (T) lifted to a 17-month high on Sept. 11 after activist shareholder Elliott Management disclosed a $3.2 billion stake. The bullish news was followed by a Bloomberg article alleging that the company had inflated DirecTV subscriber numbers before its 2018 merger with Time Warner, while a Wall Street Journal article a few days later said the slumping satellite division would be put up for sale.

AT&T denied both allegations, but the damage was done, with the stock posting four down days in a row prior to Thursday's bounce. And although it's now trading above the 200-week exponential moving average (EMA) for the first time since February 2018, the uptick has reversed near multi-year resistance that could end the recovery wave that started at an eight-year low in December. As a result, shareholders should consider their options, which include taking profits or riding out a multi-week pullback that could test strong support in the lower $30s.

There are good reasons to be skeptical about the company's prospects into the next decade. The stock is still trading well below 1999's all-time high, failing to attract buying interest during two bull markets. It has also failed to capitalize on a strong position in the smartphone industry, forced to watch competitors rise in stature and market share. Finally, it has chosen to start a streaming service at the same time that this business segment becomes over-saturated with new entrants.

T Long-Term Chart (1987 – 2019)

Long-term chart showing the share price performance of AT&T Inc. (T)
TradingView.com

The stock recovered quickly from the 1987 crash, resuming a strong uptrend that posted multiple rally waves while splitting twice into 1999's all-time high at $59.94. It tested that level twice into the fourth quarter of 2000 and turned sharply lower, dropping to a 10-year low in the upper teens in 2003. Price action ignored most of the mid-decade bull market, grinding sideways in a volatile trading range that finally yielded a breakout in the summer of 2006.

The uptick posted healthy gains but fell short of the 1999 peak, topping out in the low $40s in 2007, ahead of a steep decline that relinquished all those gains during the 2008 economic collapse. It settled at a five-year low near $20 after the crash and turned higher into 2012, stalling about five points below the prior peak. That level marked resistance for the next three years, giving way to narrow range-bound action while the Dow Jones Industrial Average zoomed to all-time highs.

A 2016 breakout completed a round trip into the 2007 peak, yielding a major reversal, followed by a channeled decline that continued through the fourth quarter of 2018. The sell-off ended at the shallow trendline of higher lows in place for the past 15 years, giving way to a 2019 uptick that has reached the 2017 double top breakdown (red line) at the same time the monthly stochastics oscillator has posted the most extreme overbought reading since 2012.

T Short-Term Chart (2016 – 2019)

short-term chart showing the share price performance of AT&T Inc. (T)
TradingView.com 

The September rally pierced the .618 Fibonacci sell-off retracement level and reversed, dropping back through harmonic resistance. It mounted the broken double top at the same time, with new support at that critical level now getting tested. The stock has carved no pullbacks since July, raising the odds that the breakout will mark an exhaustion event rather than a technical turnaround. Even so, shareholders can hang tough for now, awaiting price action around the contested level.

The on-balance volume (OBV) accumulation-distribution indicator has been gaining ground in a steady accumulation phase since December 2018 and has now lifted to an all-time high. This bodes well for future price appreciation, but bulls may have to wait while the stock works off the technically overbought readings with a decline that could reach the 200-day EMA, now rising through the low $30s.

The Bottom Line

AT&T stock has rallied to the highest high since early 2018, but the uptick looks over-extended, in need of a multi-week downturn to shake out weak hands.

Disclosure: The author held no positions in the aforementioned securities at the time of publication.